Motor and home insurers to suffer biggest losses in a decade, EY reports


UK-based motor and home insurers will suffer significant losses in 2022 and 2023 due to inflationary pressure and low premium rates, according to a report from EY.

A report from Reuters also revealed that motor and home insurers have been hit by a dip in premiums in the wake of the British financial regulator’s pricing reforms in January this year, which requires firms to charge renewing customers the same as new customers.

The report highlighted that motor insurers are affected by a rise in the cost of claims due to higher energy prices, labour costs and materials.

Home insurers will feel the brunt of high inflation as well through the extremely hot weather the UK experience in the summer.

This winter, the energy cost crisis is likely to lead to more homes being less heated this winter, which could result in a higher likelihood of pipes freezing over and other damage and repair costs.

EY’s UK Motor and Home Results Analysis revealed that motor insurers are expected to post  a loss-making net combined ratio (NCR), a measure of profitability in the insurance sector, of 115% this year.

A combined ratio of more than 100% indicated an insurers is making an underwriting loss.

This, according to EY, would be the largest loss since 2010 for motor insurers, which had benefitted from fewer claims during low levels of car usage during the Covid-19 lockdowns.

UK home insurers are also predicted to suffer their worst loss in 15 years in 2022.

The home insurance market’s NCR is expected to slump to 116% this year, before recovering to 109% in 2023, the study said.

EY’s report however predicted rates of motor and home premiums would jump in 2023, on average adding 66 pounds and £75 per policy respectively, helping offset negative factors for the sector.

Earlier this year, WTW warned the sector that motor claims inflation was on the rise.

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